Democratic Party Passes 'Interest-Free Student Loan Act' Unilaterally

[Asia Economy Reporter Gong Byung-sun] The 'Special Act on Repayment of Student Loans After Employment Amendment Bill,' which allows for some interest-free benefits on student loans repaid after employment, was passed solely by the opposition party.

The appearance of the National Assembly building. Photo by Dongju Yoon doso7@

On the 22nd, the National Assembly Education Committee held a subcommittee meeting to review the bill and approved the 'Special Act on Repayment of Student Loans After Employment Amendment Bill.' Only members of the Democratic Party of Korea attended the subcommittee. Members of the People Power Party who opposed the amendment protested and all walked out.

The 'student loan repayment after employment' system allows university students below a certain income bracket to take out loans while attending school and repay the principal and interest after graduation once they start earning income. Under the existing system, interest had to be paid even before the repayment of principal and interest began, but with the amendment, interest during the deferment period before employment is waived.

The People Power Party opposed the amendment citing concerns over fiscal burden, moral hazard, and fairness issues with young people who did not enter university and vulnerable groups. However, the Democratic Party supported it, arguing that requiring repayment of interest accrued during the deferment period would impose a heavy interest burden on young workers starting their careers.

The amendment will need to go through the full Education Committee meeting, the National Assembly Legislation and Judiciary Committee, and the plenary session for final approval. However, significant differences between the ruling and opposition parties suggest difficulties ahead.